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Sustainable Development
Sust. Dev.
20
, 128–140
(2012)
Published online 29 June 2010 in Wiley Online Library
(wileyonlinelibrary.com)
DOI
: 10.1002/sd.470
Sustainable Development: A Role for
Market Information Systems for Non-Timber
Forest Products
Manmohan Yadav
1
and Shekhar Misra
2
*
1
Indian Institute of Forest Management, Bhopal, M.P., India
2
College of Business, California State University, Chico, CA, USA
ABSTRACT
The extraction and exploitation of non-timber forest products (NTFP) has been one of the
major causes of the degradation of forests in developing countries like India. The highly
unorganized and secretive nature of intermediary operations leads to market imperfections
that are usually to the disadvantage of the collectors and cultivators. This often leads to
destructive and unsustainable harvesting techniques. We provide a possible solution based
on a market information system (MIS) that can help to remove market imperfections by
providing information related to demand and supply to collectors and cultivators. This can
be helpful in promoting sustainable harvesting and also to policy-makers and implementa-
tion agencies. A conceptual framework related to an MIS for medicinal and aromatic plants,
a subset of NTFPs, is presented. The development of such MISs can not only help to reduce
unsustainable harvesting techniques but also to improve the economic condition of some
of the poorest people. Copyright © 2010 John Wiley & Sons, Ltd and ERP Environment.
Received 29 October 2009; revised 18 March 2010; accepted 30 March 2010
Keywords:
environment; herbal products; Market Information System; medicinal and aromatic plants; sustainable development
Introduction
T
HERE
IS
A
GROWING
BODY
OF
LITERATURE
RELATED
TO
THE
PERILS
OF
ENVIRONMENTAL
DEGRADATION
AND
A
NEED
for
sustainable development, and this has provided various perspectives on sustainability (Gunder, 2006;
Hart and Milstein, 2003; Tanzil and Beloff, 2006). A signifi cant aspect of environmental degradation is
the case of ‘vanishing forests’, which play a vital role in maintaining the environmental balance
(Pawlowski, 2008; Singer, 2003; Trombly, 1992). Humans play a very important role in the preservation – as well
as destruction – of forest lands (Carr
et al.
, 2005). Among other aspects, this destruction of forests increases the
risks to the maintenance of biodiversity (Spangenberg, 2007). It is also noteworthy that the sustainable develop-
ment of forests may even have implications for the maintenance of sustainable communities and cultural heritage
resource management (Keitumetse, 2009).
* Correspondence to: Dr. Shekhar Misra, Professor of Marketing, College of Business, California State University, Chico, CA 95929-0051, USA.
E-mail: smisra@csuchico.edu
Copyright © 2010 John Wiley & Sons, Ltd and ERP Environment
A Role for Market Information Systems
129
One of the major reasons for this degradation of forests in India has been the harvesting of non-timber forest
products (NTFPs) in a non-sustainable manner, substantially through lack of information and education, and this
needs to be addressed. Although similar situations exist in many other countries (e.g. Brazil and Indonesia), this
issue has gained added urgency in the case of India since the passing of the
Scheduled Tribes and Other Traditional
Forest Dwellers (Recognition of Forest Rights) Act 2006
, by the Government of India (Gazette of India, 2007). This
act empowers the tribal and other indigenous residents of these forests, giving them the property rights to forest
produce. Although this new law has many positive aspects, it could have unintended consequences and has been
criticized by citizen groups as a prelude to widespread deforestation as a result of the lack of information available
among indigenous people (Sethi, 2007). This new law became effective 1 January 2008.
It is now fairly well accepted that supply chain management issues can be crucial to furthering the cause of
sustainability (Vermeulen and Seuring, 2009). Market imperfections can develop in the supply chain when whole-
salers (or any player) gain and retain market power by controlling the availability of information. We address one
such situation where a market information system (MIS) can help transform a closed market to an open market
where each stakeholder in the supply chain has a level playing fi eld in terms of market information. Existing
stakeholders as well as new ones can then use this system in a competitive manner. At the same time, the role of
the community in maintaining and developing forests is increasingly being realized (Pandey, 2010).
What Are Medicinal and Aromatic Plants?
Phytomedicines – therapeutic agents derived from plants or parts of plants – have been used by traditional health
systems in the form of herbs, plants and extracts for centuries, for health as well as for cosmetics. By some esti-
mates, as many as three-quarters of the world’s populations uses one or other of these medicinal and aromatic
plants (MAPs) in some form or another (National Research Center for Medical and Aromatic Plants, 2008; Schulz
et al.
, 2004). This use is in the form of medicines manufactured and marketed by fi rms of various sizes as well
as direct use of the plants (or parts thereof) by people or as directed by local health practitioners and traditional
healers. Some of the common aromatic plants in India are agarwood, basil, eucalyptus citriodora, ginger grass,
lemon grass and mentha arvensis (Sanganeria, 1998; see also CIMAP, 2008). Aromatic plants are also used in
manufacturing of food fl avors, fragrances, perfumes, cosmetics and related products (Sanganeria, 1998).
Plant Resources in India and the World
The medicinal plant resources found all over the world are important because nearly 75% of the world’s population
uses them. Of all the known plant species 10–18% are medicinal in nature (Schippmann
et al.
, 2002). Table 1
shows that in India almost half of the plant species known have some medicinal uses.
A majority of species of medicinal plants are used only in traditional medicine, knowledge about which is orally
transmitted and associated with households, communities and ethnic groups. Traditional medical systems for
which there exists documentation of knowledge and practitioners employ a more selective number of medicinal
Country of origin
Number of species
of medicinal plants
Total number of
native species in fl ora
% of fl ora which
is medicinal
Reference
China
11 146
27 100
41
(Pei Shengji, 2002a)
India
7
500
17
000
44
(Shiva
et al.
, 1996)
Mexico
2 237
30 000
7
(Toledo, 1995)
North America
2 572
20 000
13
(Moerman, 1998)
World
52 885
297 000–510 000
10–18
(Schippmann
et al.
,
2002)
Table 1
.
Medicinal fl ora across the world
Copyright © 2010 John Wiley & Sons, Ltd and ERP Environment
Sust. Dev
.
20
, 128–140 (2012)
DOI
: 10.1002/sd
130
M. Yadav and S. Misra
Traditional medical system
No. of plant
species used
Reference
Traditional Chinese medicine
500–600
Pei Shengji, 2001
Mongolian medicine
1430
Pei Shengji, 2002b
Tibetan medicine
1106–3600
Pei Shengji, 2001, 2002b
Ayruveda
1250–1400
Dev, 1999
Unani
342
Shiva
et al.
, 1996
Siddha
328
Shiva
et al.
, 1996
Table 2
.
Use of medicinal fl ora in traditional health systems
plant species. As Table 2 indicates, the number of medicinal plants used in Ayurveda is higher than in some other
systems of medicine. There are other systems of medicines current in India such as Unani and Siddha, as well as
folk medicine. Western (allopathic) medicines also use some medicinal plants as ingredients.
Aromatic plants are used to extract essential oils, spice oils and oleoresins in India. Of the large number of plant
species found in India, some 1300 species are known to contain aromatics. Even though such a large number of
plants possess these aromatics, only about 65 species have a large and consistent demand worldwide. Aromatic
plants are also used in the manufacturing of products like food fl avors, fragrances, perfumes, cosmetics and related
products. (Sanganeria, 1998)
The Market for MAPs
According to the World Health Organization herbal preparations account for 30–50% of total medicinal consump-
tion in China, while in Germany 90% of the population has used a natural remedy at some point in their life. In
the USA 158 million adults use complementary medicines and herbal supplements (WHO, 2003). The global
market for herbal products, including medicines, health supplements, and herbal beauty and toiletry products, is
estimated at US$62 billion and is growing at a rate of 7% annually (Exim Bank, 2003) and is expected to grow to
US$ 555 billion by 2010 (Sinha, 2002). The WHO’s forecast is that the global market for herbal products would
be of the order of US$5 trillion by 2050 (Planning Commission India, 2000). The world market for herbal
remedies in 1999 was estimated to be worth US$ 19.4 billion, with Europe in the lead (US$ 6.7 billion), followed
by Asia (US$ 5.1 billion), North America (US$ 4.0 billion), Japan (US$ 2.2 billion), and the rest of the world
(US$ 1.4 billion) (Laird and Pierce, 2002).
The overall herbal market in India was estimated to be about US$ 1.75 billion in 2008, with exports accounting
for about US$ 900 million, and these numbers were expected to more than double by 2012 (Sharma, 2008). The
domestic market of Indian Systems of Medicine and Homoeopathy was of the order of US$ 1 billion in 2000. Of
this, the Ayurvedic drug market alone was of the order of US$ 800 million, which has been expanding fast because
of a resurgence of interest in natural and herbal remedies (NMPB, 2004).
Ninety per cent of the raw material for herbal products comes from the forests. It has also been observed that
70% of medicinal plants involve
destructive collection
because the parts used are wood, roots, stem, bark or the
whole plant. Even in 2002, 90–95% of the raw material for domestic production was supplied from wild sources,
and fewer than 20 out of 660 wild plant species that are traded in India are under active commercial cultivation.
(CEE, 2003).
Market Issues for MAPs
The MAP market in India is an oligopsony, with relatively few well-informed (and secretive) buyers and a very
large number of ill-informed sellers. The limits on information from the demand side are intentional for the
purpose of artifi cially manipulating the market price in their favor, whereas the information fl ow from the sellers
Copyright © 2010 John Wiley & Sons, Ltd and ERP Environment
Sust. Dev
.
20
, 128–140 (2012)
DOI
: 10.1002/sd
A Role for Market Information Systems
131
is unintentional. Such opaque market structures are disadvantageous to the collectors and cultivators and also lead
to overharvesting of the natural resource in the absence of reliable and accurate information about market demand
and price. These markets suffer from the following imperfections (Dutta, 2001):
• Lack of proper information about the demand and supply of the products being traded
• Lack of assured markets for the collectors and cultivators
• Unique characters of medicinal plants and uncertainty regarding their availability
• Inadequate knowledge about the herbs being collected, cultivated or traded
• Quality issues in collection of medicinal herbs and the processing of fi nal products
• Stakeholders not aware of intellectual property rights issues related to the medicinal plant products
• Market barriers for new entrants in a closed market with scarce market information
• Problems in marginal cost pricing of the medicinal herbs, i.e. with sellers unable to receive fair value.
There has also been depletion of medicinal plant resources as the result of irregular and unscientifi c collection,
uncontrolled forest grazing by cattle, forest fi res, shifting cultivation patterns, and biotic pressure, well beyond the
carrying capacity of the land given the burgeoning human as well as animal population in India. The government
organizations and non-government organizations (NGOs) that attempt to help the cultivators and collectors are
also severely hampered by the absence of reliable and accurate market data.
In India the sale of the medicinal herbs grown in the wild is usually by locals with the herbs in their raw form
without any signifi cant processing or value addition. The producer/collector access to consumers is limited to sales
made in local villages or in the weekly village markets. A major portion of their collection is sold to intermediaries
like contractors and commission agents who operate in the area, before they get to the organized sector. The market
is also geographically limited. Access-to-market issues are more pronounced in the case of perishable items or
items containing active principles, which change or deteriorate with time. The relatively small volume of collection
further aggravates the problem, forcing the local tribal population into a vicious circle of a small market, low pro-
duction and (leading to) small marketable surplus. This limited marketable surplus makes them more vulnerable
and makes their exploitation possible because it continuously erodes their bargaining capacity as their need for
conversion of small production into cash becomes more acute. Wide variation in the content of active principles
of the wild varieties of medicinal herbs constitutes yet another supply-side imperfection. Such variations complicate
the process of manufacturing herbal medicines and affect the effi cacy rates and quality control. Scientifi c cultiva-
tion of medicinal plants through bioengineering and modern farming techniques could overcome this problem,
but progress in this area is almost non-existent.
Some of the consequences of market imperfections are the lack of information to the needy stakeholders and
posing obstacles in the path of commercial exploitation of MAPs in a sustainable manner. In India, availability of
reliable data continues to be an issue; even the statistics for demand, supply and trade related to timber, which is
a major produce from the forests, are not reliable and accurate (ITTO, 2003). Similarly, the statistics for Non-Wood
Forest Produce are also only estimates and reliable data on exact inventory, extraction and trade are not available.
One of the consequences, as identifi ed in a study by the Associated Chambers of Commerce and Industry of India
(Assocham), is that over 70% of the plant collection involves destructive (non-sustainable) harvesting because of
the use of parts like roots, wood, stem and the whole plant, whereas traditionally other parts like the (renewable)
leaves and fruits were preferred This problem has increased because demand has been growing very rapidly. This
poses a threat to the genetic stock and is not sustainable (Sharma, 2008).
Complexity of the MAP Market Structure and Supply Chain
The MAP market is highly complex with a large number of players at the producer, trader and manufacturer levels.
The complexity of the MAP market is further accentuated because of the different forms of the herbs traded, the
lack of proper herb identifi cation and fi nal product classifi cation systems, the lack of governmental control and
monitoring of the markets, and an absence of assessment of MAP inventory available in the forests. Each of these
problems is discussed here. Supply of medicinal plants occurs from wild harvest as well as cultivation. The local
villagers either consume part of their produce or sell it to local traditional medicine practitioners, local traders,
Copyright © 2010 John Wiley & Sons, Ltd and ERP Environment
Sust. Dev
.
20
, 128–140 (2012)
DOI
: 10.1002/sd
132
M. Yadav and S. Misra
local markets or agents. The middlemen at various levels collect and sell the produce to the next level with the sole
objective of making maximum profi t in the short term. The complex supply chain is outlined in Figure 1.
Even the largest retailers – who could and do perform some wholesaling functions – are forced to buy medicinal
plants from the oligopolistic wholesalers who command high margins. This is a result of the lack of market access,
which results in lack of information on the part of these businesses about the source, supply and price of medicinal
plants. The issue is magnifi ed at the national level. The MAP produce is traded in various forms, such as raw,
semi-processed or processed, and through various channels; this makes demand assessment at the local level dif-
fi cult. At the manufacturer or processor level there exist a large number of primary and intermediate processors.
Initial processing may be carried out by the collectors or cultivators whereas some intermediate processors buy
the herbs from collectors and local traders, process them and sell them to larger manufacturers or at the local
markets. The presence of multiple levels of processors and users, traders, manufacturers and exporters combined
make the market structure complex and the reliability of data is very low.
Figure 1.
Market structure in medicinal and aromatic plants trade
Copyright © 2010 John Wiley & Sons, Ltd and ERP Environment
Sust. Dev
.
20
, 128–140 (2012)
DOI
: 10.1002/sd
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